Arab Press

بالشعب و للشعب
Sunday, Sep 08, 2024

First Republic shares fall as Yellen says not considering 'blanket insurance' on bank deposits

First Republic shares fall as Yellen says not considering 'blanket insurance' on bank deposits

A "bull case" scenario for the shares of beleaguered First Republic Bank (FRC.N) as it considers its options became more difficult on Wednesday after Treasury Secretary Janet Yellen said there is no discussion on insurance for all bank deposits without approval from the U.S. Congress.
First Republic, whose shares have lost much of their value since the banking crisis started in the U.S. on March 8, is among banks speaking to peers and investment firms about potential deals in the wake of U.S. regulators' taking over Silicon Valley Bank (SIVB.O) and Signature Bank (SBNY.O) following bank runs.

Morgan Stanley analyst Manan Gosalia, in a report earlier this week, set a target price of $54 for First Republic shares in a best-case scenario. The stock on Wednesday closed at $13.33, down 15.5% The optimistic case was based on a scenario in which the Federal Deposit Insurance Corp (FDIC) insures all consumer deposits through the end of the banking crisis, triggering a return of the majority of customer deposits, according to the report.

That hope was reduced on Wednesday, after Yellen told a hearing of the U.S. Senate's Appropriations Subcommittee on Financial Services that she was not considering such a move without congressional approval and was reviewing bank risks on a case-by-case basis.

"I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits," she said.

On Tuesday, she said the Treasury and regulators had a "resolute commitment" to safeguard deposits of smaller institutions, including community banks.

Her latest remarks affected all regional bank stocks, said R.J. Grant, head of trading at Keefe, Bruyette & Woods.

"Yellen struck a different tone for sure. There was this feeling that there was behind-the-scenes talks in Washington that depositors would be protected," Grant said.

JPMorgan (JPM.N) Chief Executive Jamie Dimon met with Lael Brainard, director of the White House's National Economic Council, on Wednesday during a planned trip to Washington, according to a person familiar with the situation. The meeting agenda was unclear. It came as First Republic's efforts to secure a capital infusion continued.

The Morgan Stanley report considered that a potential extension of FDIC insurance could bring a majority of First Republic's customers back. Banks involved in First Republic's rescue negotiations are asking for a loss-sharing arrangement with the U.S. government similar to the terms agreed by Switzerland's UBS Group (UBSG.S) in its emergency takeover of rival Credit Suisse (CSGN.S) , according to an industry source.

The acquirer would receive support if after buying First Republic it finds a larger loss than expected, added the source, who requested anonymity to disclose private conversations.

First Republic declined to comment.

The bank is looking at ways it can downsize if attempts to raise new capital fail, Reuters reported on Tuesday, citing three people familiar with the matter.

Even if it clinches a cash infusion, the lender will probably need to take losses on securities in its so-called held-to-maturity portfolio, the Morgan Stanley analysts wrote.

A potential buyer would need to absorb $26.8 billion in mark-to-market losses from First Republic's loan and securities portfolios, while an extra $9.5 billion is needed to recapitalize the bank, the Morgan Stanley analysts estimated.

In the worst-case scenario, First Republic's shares would sink to just $1, Morgan Stanley analysts estimated.

Citigroup withdrew its estimates for First Republic on Tuesday and put the stock under review. Analysts Arren Cyganovich and Kaili Wang said in a report that "some form of government intervention seems increasingly likely, albeit in what form remains unclear."
Comments

Oh ya 1 year ago
Let the failing banks collapse, bad decisions from bank management is not the responsibility of the taxpayers. The banks that think that the government will always bail them out then they will continue with their risky investments

Newsletter

Related Articles

Arab Press
0:00
0:00
Close
Mass Protests in Israel Over Hostage Crisis Amid Escalating Regional Tensions: A Global Overview
Global News Roundup: Iraq's Alleged Espionage Debunked, Syrian Singer Shines, Ivory Coast Collision Tragedy, U.S. College Protests, Russian Shelling Incident, and Yemen Drone Downing
Pakistani Citizen Arrested for Plotting Terror Attack on Jews in NYC
Gaza War Marks Its 12th Month
Israeli Attack Kills Three Emergency Workers in Lebanon
Escalating Hezbollah-Israel Conflict: Global Leaders Speak Out Amid Tragedies and Humanitarian Crises
Kamala Harris and Trump Gear Up for Pivotal Debate as Global Conflicts Escalate
Protests in France Over New Prime Minister, Tragic Events in Mormant, and Global Developments
Global Turmoil: Zelensky Seeks Military Aid, Mexico Re-arrests Cartel Leader, and Kenya School Fire Tragedy
إيطاليا تحقق فوزاً تاريخياً على فرنسا وتتغلب عليها 3-1 في دوري الأمم الأوروبية
Global Turmoil: Rocket Attacks Close Manipur Schools, North-South Korean Tensions, and Typhoon Yagi's Devastation
Tim Walz Supports Palestinian Rights Amid Conflict, As Global Leaders Push for Ceasefire and Diplomatic Resolutions
International Turmoil and Diplomatic Maneuvers: Jordan Condemns Tragic Killing, US-Iran Tensions Escalate, and Biden Hosts Starmer for Critical Talks
Global Turmoil: UK's Crackdown on Smugglers, Zelensky's Plea for Arms, and New Leadership in Thailand
Displaced Gazans Face Dire Conditions Amid Israel-Hamas Conflict; Global Climate Crisis Intensifies
Former Philippines Mayor Faces Money Laundering Charges; China Ends International Adoptions; Shanghai Unveils World's Largest Indoor Ski Resort
Global Turmoil: UN Calls for Action in Sudan, Climate Challenges for Iraqi Farmers, and Global Leaders Seek Unity Amid Rising Conflicts
Super Typhoon Yagi Ravages Southern China: Major Disruptions Amid Asia's Strongest Storm of the Year
Rising School Security Debate, Global Defense Moves, and Political Intrigues Mark Headlines
US Charges Russian GRU Officers for Cyberattacks, Blinken Tackles Haiti Crisis, and Global Turmoil Unfolds from Middle East to Africa
Escalating Tensions: Israeli Airstrikes in Lebanon, Tragic Gaza Deaths, and Ceasefire Struggles Amid Arab League Criticism
Zelensky's Cabinet Overhaul, EU's Serbia Ultimatum, Gaza's Polio Drive, Tunisian Election Concerns, Bazzi Pleads Guilty, and NATO Praises Ukraine's Historic Kursk Offensive
ICC Chief Prosecutor's Arrest Warrants on Israeli and Hamas Leaders Highlight Justice; UK Suspends Arms Export Licenses to Israel Amid War Crimes Concerns; Humanitarian Efforts Shine in Gaza; US Vows Continued Syria Engagement; Tragedy in English Channel; Michel Barnier Named French Prime Minister
Happy 26th Birthday, Google!
US Charges Hamas Leaders With Terrorism Over October 7 Attack on Israel
UK Suspends 30 Arms Export Licenses to Israel: Details and Implications
Hossein Shamkhani: The Rise of an Oil Tycoon
Biden Criticizes Netanyahu Over Hostage Crisis
Macklemore Cancels Dubai Show Over UAE’s Role in Sudan Conflict
Israeli Union Announces Nationwide Strike After Hostages Found Dead
Iranian President's Helicopter Crash Attributed to Bad Weather
AI Revolutionizes Military Tactics in Israel's Conflict with Gaza
Israeli Hostage Rescued in Complex Gaza Operation
Heist of the Century: $2.5 Billion Stolen in Iraq
Singles in Pakistan Embrace Modern Matchmaking
Gen-Z Globe-Trotter Calls Egypt 'Most Annoying'
Hamas and Islamic Jihad Claim Responsibility for Tel Aviv Bomb Blast
Extensive Forest Fires Force Evacuations in Izmir, Turkey
Starmer Calls on Iran to Refrain from Attacking Israel
US Approves $20 Billion Arms Package for Israel Amid Gaza Conflict
Israel Expands Evacuations in Gaza Amid Continued Strikes
Israeli Intelligence Warns of Imminent Iranian Attack
Iranian Nobel Winner Narges Mohammadi Hurt in Prison Clash
Iraq Proposes to Lower Marriage Age for Girls to Nine
Gazans Concerned Over Hamas’s New Chief Yahya Sinwar
Israel Vows to 'Eliminate' New Hamas Chief Yahya Sinwar
Yahya Sinwar Named Hamas Chief After Ismail Haniyeh Killing
Diplomatic Efforts Intensify Amid Rising Mideast Tensions between Israel and Iran
Nine UNRWA Employees Terminated Over Alleged Involvement in Hamas Attack
Hamas Regrets October 7 Attack on Israel
×